Norway's central bank is worried about a housing bubble

Last Thursday, it left interest rates unchanged, even though oil
prices have continued to decline and central banks around the
world are easing.

That's because Norway's central bank is worried about something
else: home prices.

Mohsin interviewed central bank governor Oeystein Olsen, who said
the risk of low oil prices hasn't cleared, but hasn't become that
much worse either.

And now, Olsen's focus is on Norway's hot
housing market. Norwegian debt is at a record high,
and about twice as much as household disposable incomes,
according to Mohsin.

Norway's home prices rose to a record high in
February, and that's caused the central bank to 'lean
against the wind': A situation where central banks use policy to
soften inflation or boost their economies against the general
direction of the economic cycle.

Last December, Norway cut rates, saying
"activity in the petroleum industry is softening and the sharp
fall in oil prices is likely to amplify this tendency."
Norway is Europe's largest oil producer.

However, in a
presentation Kjersti Haugland, head of DNB Markets in
Oslo, said home prices are rising for the right reasons but will
decline over the next couple of years.

Haugland said high prices reflect "exceptional
economic performance throughout the past 20 years, and high
income growth." The presentation added that home prices "are set
to decline for the next three years (-8%), as a the oil boom
fades and fundamental drivers go from being strongly positive to
mildly negative."

Here's Haugland's chart showing that inflation
and building costs have been rising at a faster pace than wages.